Credit cards can be an essential aspect of modern living. Without them, many people would be unable to even out the bumps in their monthly finances and when used sensibly they can provide a useful service for the modern household.
However, credit cards high interest rates carry higher rates than secured loans, and hefty charges if payments are missed which can lead to problems if misused.
Always pay the whole balance every month.
This is the most crucial element in your strategy for using your card responsibly. If you don’t take this route then you can start to see your card a boost to your spending power, but this is the same as building up a loan in small increments. Would you borrow £3000 to casually spend? Probably not. Going down this path makes it easy to build up such a debt and with high interest rates this can spiral out of control. The worst way to use a credit card is the pay of minimum monthly amount, as this guarantees and growing debt. To ensure you are getting the best deal compare credit cards online for the best interest rates.
Don’t use your credit card to withdraw cash.
In an emergency, where there are no other options then it can be literally life-saving to have a credit card with a cash limit to hand. The problem with doing this regularly is that most cards charge a cash-handling fee for ATM withdrawal. As this can be up to £5 per withdrawal it is can be a significant percentage of the money you require.
Increased protection against fraud.
A credit card is a loan, so in the event of fraudulent use the criminal will not have direct access to your bank account. Most companies employ rigorous checks to prevent fraud, and will refund in the event of a crime. In the event of losing your card it far simpler to replace a credit card than a debit card making credit cards a better option for travel abroad.
Many cards will insure your purchases against loss, theft or damage to purchases for a given period. At the most basic level paying with a credit card provides a paper trail that cash does not; making accounting and proving purchases a snap. Some cards also offer insurance, and will replace the item in the case of an accident. This type of insurance is great for online purchases.
Credit card companies will often add sundry perks to their card to attract your business. You may qualify for air miles, travel discounts and access to cheaper insurance. In addition cards associated with a retailer may offer additional discounts for cardholders.
Building a credit score.
Having a good credit score will ease applications for loans, utilities and everyday things like mobile phone contracts. Having a credit card is an opportunity to show you can use credit responsibly and boost your credit rating. It’s advisable to not carry a large balance as this can have a detrimental effect on your credit rating and to pay the card in full each month
Post by Sarah
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